It's tax season. The season that is nudged in between winter and spring. A fifth season that we are not taught as children but learn as adults. That is part of the problem: most are not taught the ways to make tax season something to eagerly await, or at the very least, not something to dread. Here are some helpful tips that can make this fifth season one to look forward to, even if only because it marks the beginning of spring.
Contribute to a retirement plan
Being a big fan of efficiency myself, I love accomplishing two goals at once. Retirement accounts can do just that! 401(k)s, 403(b)s, 457s, and IRAs, are planning vehicles that can allow those contributing to deduct their contributions and invest in a tax-advantageous way for future use. While your qualification for a deduction is going to vary based on what your employer is offering (or not offering) as well as your income, every single person has the ability to make some sort of deductible retirement account contribution. Not sure which account makes sense for you? Ask your financial advisor. Let us show you how you can simultaneously save on taxes today and in the future –there are ways!
Adjust your exemptions on your W4
A W4 is the federal tax form you filled out when you were first hired. It is intended to tell your employer how much they need to withhold for federal income taxes. The problem I see is that many of my clients do not update their W4 when they should. As a result, many clients have too much withheld meaning they will get a larger refund come tax season. You should not view this as a bonus –far from it! It is simply money back that you lent to the government. Oh yeah, you lent it for free. If I am describing your situation, you might want to update your allowances on your W4. If you haven’t updated your W4 since you added additional income, were married, or had a child, it is time to take second look. Your goal should be to “break even” and not owe or be owed much come tax season. Not sure how to update your W4? Consult a tax professional!
Work with a tax professional
I meet with a lot of people who are not getting professional help when it comes to preparing a tax return and filing of taxes. Most are open to professional help as they are already receiving professional help for their financial planning and investments. Some still have reservations citing the cost assuming it prohibits them from using a tax expert’s services. Speaking as someone who has met dozens of accountants, I will say that most charge reasonable prices for the services rendered. Even if you work a salaried position, your situation most likely warrants an extra set of eyes. And better yet, accountants can help you owe less in taxes or save you from a potential audit. Ask your advisor for a referral.
By Zach Bainter,
The opinions voiced in this material are for general information only and are not intended to provide specific financial or tax advice for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
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